published Friday, February 4th, 2011

Colmans: Your basic homeowners and renters insurance policy explained

With the bitter winter weather seen in much of the U.S., emergency management agencies are already very concerned with the upcoming severe weather season when freezing temperatures, snow and ice give way to severe thunderstorms, tornadoes, high straight line winds and flooding, especially in the Southeast.

Severe Weather Week occurs annually in February and is all about the importance of planning and preparation.

The question is - who is planning and preparing? The government and social service agencies that support those in harm’s way certainly do, but what about those of us who too often think, bad stuff happen to others, but not to me.

Look at the last year and consider the tornadoes, floods, lightning-caused fires, and traffic crashes caused by blinding rain and very slick roadways.

In a recent column we looked at a basic auto insurance policy, but now we turn our attention to the protection we need for where we live, as a homeowner or a renter.

What is in a standard homeowners insurance policy? Here’s how the Insurance Information Institute explains the basic coverages:

1. Coverage for the structure of your home.

2. Coverage for your personal belongings.

3. Liability protection.

4. Additional living expenses in the event you are temporarily unable to live in your home because of a fire or other insured disaster.

Structure: This part of your policy pays to repair or rebuild your home if it is damaged or destroyed by fire, hurricane, hail, lightning or other disaster listed in your policy. It will not pay for damage caused by a flood, earthquake or routine wear and tear. When purchasing coverage for the structure of your home, it is important to buy enough to rebuild your home.

Most standard policies also cover structures that are detached from your home such as a garage, tool shed or gazebo. Generally, these structures have a coverage amount equal to 10 percent of the amount of insurance you have on the structure of your home.

Personal Belongings: Your furniture, clothes, sports equipment and other personal items are covered if they are stolen or destroyed by fire, hurricane or other insured disaster. Most companies provide coverage for 50 to 70 percent of the amount of insurance you have on the structure of your home. If you have $100,000 worth of insurance on the structure of your home, you would have between $50,000 to $70,000 worth of coverage for your belongings. The best way to determine if this is enough coverage is to conduct, and keep up to date, a home inventory.

This part of your policy includes off-premises coverage. This means that your belongings are covered outside your home, unless you have decided against off-premises coverage. Some companies limit the amount to 10 percent of the amount of insurance you have for your possessions. You have up to $500 of coverage for unauthorized use of your credit cards. However, expensive items like jewelry, furs and silverware are covered, but there are usually dollar limits if they are stolen. Generally, you are covered for between $1,000 to $2,000 for all of your jewelry, furs and similar valuables. To insure these items to their full value, purchase a special personal property endorsement or floater and insure the item for its appraised value.

Trees, plants and shrubs are also covered under standard homeowners insurance. Generally these have a coverage amount equal to 5 percent of the amount of insurance on the house — up to about $500 per item. Perils covered are theft, fire, lightning, explosion, vandalism, riot and even falling aircraft. They are not covered for damage by wind or disease.

Liability Protection: Liability covers you against lawsuits for bodily injury or property damage that you or family members cause to other people. It also pays for damage caused by your pets. So, if your son, daughter or dog accidentally ruins your neighbor’s expensive rug, you are covered. However, if they destroy your rug, you are generally not covered.

The liability portion of your policy pays for both the cost of defending you in court and any court awards — up to the limit of your policy. You are covered not just in your home, but anywhere in the world.

Liability limits generally start at about $100,000. However, experts recommend that you purchase at least $300,000 worth of protection. Some people feel more comfortable with even more coverage. You can purchase an umbrella or excess liability policy that provides broader coverage, including claims against you for libel and slander, as well as higher liability limits. Generally, umbrella policies cost $200 to $350 for $1 million of additional liability protection.

Your policy also provides no-fault medical coverage. In the event a friend or neighbor is injured in your home, he or she can simply submit medical bills to your insurance company. This way, expenses are paid without a liability claim being filed against you. You can generally get $1,000 to $5,000 worth of this coverage. It does not, however, pay the medical bills for your family or your pet.

Additional Living Expenses: This pays the additional costs of living away from home if you can't live there due to damage from a fire, storm or other insured disaster. It covers hotel bills, restaurant meals and other reasonable living expenses incurred while your home is being rebuilt. Coverage for additional living expenses differs from company to company. Many policies provide coverage equal to about 20 percent of the insurance on your house. You can increase this coverage, however, for an additional premium. Some companies sell a policy that provides an unlimited amount of loss-of-use coverage, but for a limited amount of time.

If you rent out part of your house, this coverage also reimburses you for the rent that you would have collected from your tenant if your home had not been destroyed.

Renters: If they purchase renters insurance, they have much the same coverage as homeowners with the exception of the coverage for the structure. That is the responsibility of the landlord. The renter is protected for loss of personal belongings, liability and additional living expenses, but the cost of a renter’s policy costs much less since there is now structure coverage.

Sadly, less than 50 percent of renters obtain this coverage so they have no financial protection in case of a fire, theft, disaster or liability claim that the policy would have covered.

Protecting yourself and your family has many aspects including adequate insurance for your home, owned or rented.

David Colmans is the executive director of the Georgia Insurance Information Service. Contact him at 770-565-3806 or e-mail dcolmans@giis.org.

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